TNK-BP and the battle with Russia

The last foreign oil baron was airlifted out of Russia on Thursday night in scenes that would not have looked out of place during the fall of Saigon.

Besieged by angry locals, BP's Robert Dudley was rushed from his Moscow headquarters in a secret operation - leaving £8 billion worth of British investment stranded behind him.

We don't know if Dudley was actually helicoptered from the rooftop, but his ignominious evacuation followed the departure of 60 other expats who had been barred from entering their own building by security guards. They left behind mounting harassment over their visas, legal threats and the remote, but terrifying, possibility of assassination attempts.

It might sound dramatic, but such is life in the wild world of $130-a-barrel oil. BP's battle for control of its Moscow-based joint venture, TNK-BP, follows similar humiliation for Shell and Exxon in Russia and brings back memories of the industry's exile from the Middle East in the 1970s and the more recent seizure of foreign oil assets in Venezuela.

So-called "resource nationalism" is nothing new, but the soaring price of the black stuff has emboldened countries which previously felt that welcoming Western investment and technology was a necessary concession.

The tussle over TNK-BP also coincides with a sharp deterioration in Anglo-Russian relations more generally: ranging from the harassment of British Council employees and the expulsion of diplomats by both countries to, notoriously, the poisoning of a Russian dissident in London.

Yet for all the outrage in Britain, the row between BP and its Russian co-investors is, on another level, a simple commercial dispute with a simple commercial solution.

The oligarchs who control the other half of TNK-BP disagree with their British partner over strategy. They want to expand overseas; BP wants to concentrate on Russia and the Ukraine. BP wants to reinvest its profits; the partners are said to be keener to bank some money now.

Tensions have been worsened by political sentiment: the Russians believe Western oil majors like BP are holding back their international ambitions.

But despite his staff's problems with visas, BP chief executive Tony Haywood insists publicly the row has "nothing to do with state involvement".

So which is the truth? Is this business or politics? The misuse of state immigration controls in pursuit of cynical commercial gain, or the understandable expression of Russian frustration toward imperialist Western multinationals?

It is both. Business today is political, and not just in Russia.

As protectionist sentiment grows around the world, the two realms have become inextricably linked. Control of energy resources has become second only to terrorism as the major national security question of our age.

Russian companies are not the only ones who want to expand internationally. Chinese and Indian multinationals are also challenging their European and American rivals.

Their dynamism is laudable. Without it, the faltering economies of the West would stop in their tracks. But their determination to keep Western rivals at bay could be counter-productive.

The Moscow stock market fell 6 per cent on Friday in the wake of the TNK-BP drama and even some of the most Russophile foreign investors are beginning to ask whether they are receiving fair treatment. Russia and China may not need foreign capital as much as they did a few years ago, but they cannot grow without foreign customers.

A wave of retaliatory trade restrictions in the West could cripple both economies.

More importantly, the voices in Russia who regard foreign investors as a threat are plain wrong. BP is right to focus TNK-BP on investing in Russian oil production - that is where the greatest productivity gains can be achieved. The idea that foreign ownership of strategic assets like oil makes them less useful to the host nation shows a profound misunderstanding of the benefits of global capitalism.

Free trade is not a zero-sum game, even for the oilmen.

For this reason, it is time to stand up to Russia's economic bullies. Tit-for-tat economic sanctions are rarely much more use than the ritual exchange of diplomats that accompanies espionage allegations, but on this occasion some display of muscle is called for.

British politicians may not be able to achieve much but London's powerful international business community needs to be taking this threat personally. If London-listed companies such as BP cannot be assured of proper shareholder protection in Moscow, then the many Russian companies listed in London must be made be to fear the consequences.

The simplest and fairest starting point would be for regulators over here to announce an investigation into the shareholder protection afforded to all companies operating in Britain and Russia. It may not help BP overnight, but official opprobrium over here is the best way of deterring official corruption over there.